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FREDRICKA WHITFIELD, CNN ANCHOR: In our "Dollar Signs" segment today we're going to take a closer look at the Martha Stewart case. The duchess of domestic can cook up anything in the kitchen, but does she have a recipe to save her from prison living? She stepped down as a chairman and CEO of her company this week to fight charges she conspired to hide an illegal stock sale. CNN's Chris Huntington says she's using the Internet now to help make her case.

(BEGIN VIDEOTAPE)

CHRIS HUNTINGTON, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Martha Stewart ducked all questions after pleading not guilty in court on Wednesday, but she stood tall in an open letter published in "U.S.A. Today" and posted on her new Web site, marthatalks.com. Stewart insists she's innocent and that she'll fight to clear her name.

MARTIN POLLNER, ATTORNEY, LOEB & LOEB: It's brilliant lawyering for defense counsel, because she is a public person, to get her story out as quickly as possible, particularly after the U.S. attorney and the FBI had this enormous press conference.

HUNTINGTON: The defense may have the edge on public relations, but the government says it has crucial evidence showing Stewart and her broker, Peter Bacanovic, altered their records to cover up the allegedly improper sale of ImClone stock. According to the indictment, "Stewart deleted the substance of Bacanovic's phone message, changing the message from 'Peter Bacanovic thinks ImClone is going to start trading downward' to 'Peter Bacanovic Re: ImClone.'" And in what could be the hallmark of this case, the indictment also alleges that "Bacanovic altered his worksheet, using ink that was blue ballpoint, but was scientifically distinguishable from the ink used elsewhere on the worksheet. Bacanovic added the notation "@60" near the entry for ImClone."

(on camera): The main defense for Stewart and Bacanovic against all the government charges, including the SEC charge for insider trading, is that they had a longstanding order to sell ImClone stock if it fell below $60 a share, and that blue ink on Bacanovic's worksheet could play a pivotal role in the case.

JACOB ZAMANSKY, SECURITIES ATTORNEY: You remember the O.J. Simpson case where they had all these forensic DNA experts? We're going to see ink experts in this case. The allegation here is that he used two different pens on two different days, and I think that's going to be a big issue.

HUNTINGTON (voice-over): The government has another ace in the hole, Bacanovic's former assistant at Merrill Lynch, Douglas Fenuil, who has already told the feds there was no standing order to sell ImClone at $60 a share.

But defense attorneys are most perplexed by the government's charge that in an effort to prop up her company's stock, Stewart "made or caused to be made a series of false and misleading public statements," statements that she was innocent and had a standing order to sell ImClone stock.

POLLNER: It's the weakest count. I think having been a former prosecutor, I think it was a negotiation with the SEC to get some securities count in this indictment. It shows the weakness of their original theory of the insider trading story.

HUNTINGTON: And as Stewart's lawyers will argue, if there was no crime for insider trading, there's no jail time for their client.

Chris Huntington, CNN, New York.

(END VIDEOTAPE)

WHITFIELD: Well, love her or hate her, is Martha getting a fair shake, and what could it mean for investors in Stewart's empire? Joining us in our roundtable discussion today from New York is CNN's financial correspondent Allan Chernoff and Dennis Kneale, the managing editor of "Forbes" magazine.

All right, gentlemen, good to see you. Well, let me begin with you, David. You know, she is leaving, Martha is leaving it up to her attorneys to take care of the legal battles. She's taking the reins, though, in her public, I guess, battle, with her Web site, marthatalks.com, and already something like a million hits, is she winning in that campaign so far?

KNEALE: I think it's extraordinary and it shows real moxie, because let's remember, prosecutors have just charged her for securities fraud, arguing that when she dared, almost a year ago, to publicly deny that she was guilty of any insider crime, they say that that was sort of falsely testifying and getting her stock price up. So they're going to end up filing far more charges if they think that charge can stick. Of course, it's a ridiculous charge and it won't stick.

I'm surprised that Martha's really taken an aggressive offensive here, and I don't think the federal regulators and prosecutors are used to this at all.

WHITFIELD: Well, certainly aggressive in that she really is responding to these e-mails personally. She's winning an awful lot of sympathy. And Allan, maybe you can explain to us some of the things that she might be saying on her Web site as she makes a personal appeal to these people, maybe even trying to help taint or influence the potential jury pool?

ALLAN CHERNOFF, CNN FINANCIAL NEWS CORRESPONDENT: Well, that is what some attorneys say, that it's a smart move for Martha Stewart to get out there and give her story, because we are going to be selecting a jury here, and so potential jurors are going to be taking this information. And obviously the attorneys are going to weed out jurors who perhaps have a bias against their client, but nonetheless, this is a story front and center, everybody knows about it, just like the O.J. case. And so Martha Stewart knows she's got to get her message out. Frankly, I'm not surprised at all that she's taking this tack. It's a smart move. I think she has nothing to lose by doing it.

KNEALE: Allan...

WHITFIELD: I'm sorry, go ahead.

KNEALE: Allan, I just wanted to ask you, are the feds going to end up charging Martha with jury tampering here? I mean, I don't really think that her efforts are a clear attempt to influence prospective jurors. Right? She wants to reach millions of people and let them know that she's innocent.

CHERNOFF: She has actually consulted with her attorneys in making this decision to go forward, to run the full-page ad in "U.S.A. Today," to start this Web site. She was involved, in fact, in the design of the Web site, not only in the content.

By the way, the colors on the Web site -- Granny Smith Green and Robin's Egg Blue.

WHITFIELD: Oh, those are gentle colors.

CHERNOFF: Lovely.

WHITFIELD: All right, well, let's talk about why she even stepped down as CEO and chairman. I mean, there is no guilty verdict. If she were found guilty, and correct me if I'm wrong, of insider trading, then she would not be allowed to be a CEO of a public company. But certainly there are no insider trading charges. Why would she step down, Allan?

CHERNOFF: Well, Fredricka, let me just say that on the civil side, in fact there is an insider trading charge. There's no criminal insider trading charge. But you're correct to say that if she's cleared of all of this, she certainly can still run her company and she probably would reassume the chairman and CEO slots over there. But let's also keep in mind she's still on the board of directors, she still owns 61 percent of the stock, she has most of the voting right here, she still pretty much does control the company. WHITFIELD: Dennis, do you see this as her way of kind of a last ditch effort to make sure that this company is not dissolved altogether while she's fighting her legal battle?

KNEALE: Sure. I think Martha realizes the single most important asset of her company is Martha Stewart herself. And she's got to do this. And also, I mean, this woman cares so much about her image. She was so close to a settlement over the weekend, and in the end could not admit that she had lied, and so withdrew her agreement to go ahead and settle. And image is everything to her.

WHITFIELD: OK, Dennis Kneale and Allan Chernoff, hold on for a second. We're going to take a short break -- and God, that cake looks so good, I'm so hungry right now. OK, well, after this break we'll be accepting your e-mail questions at cnn.com, dollarsigns@cnn.com, or call in, the number is 1-800-807-2620. We'll be right back.

(COMMERCIAL BREAK)

WHITFIELD: Welcome back to "Dollar Signs." We've been talking about domestic diva Martha Stewart and the financial pickle she's found herself in. We're taking your e-mail at dollarsigns@cnn.com, or just call us at 1-800-807-2620.

And re-joining our roundtable discussion from New York is CNN financial correspondent Allan Chernoff and Dennis Kneale, the managing editor of "Forbes" magazine.

All right, gentlemen, let's resume our conversation here, and let's talk about whether the label of Martha Stewart, in her magazine "Martha Stewart Living," or even the K-Mart merchandise, is it still a good thing, Dennis?

KNEALE: Is it still a good thing?

WHITFIELD: Yes, get it?

KNEALE: Her magazine ad pages are down significantly, but that's because all magazines have their ad pages down. I think, though, if you buy Martha's products, you're going to continue to buy Martha's products. You can love her or hate her. There are people who can't stand her and they want the (UNINTELLIGIBLE)...

WHITFIELD: Don't you think these legal proceedings, though, either fuels the fire, either you love her more or you hate her more?

KNEALE: Yes. It could help that, couldn't it? I mean, she could end up looking like a hero. And what if she actually beat these charges? Oh, my gosh, imagine. That would make the ones who hate her, hate her even more, right?

WHITFIELD: All right. Well, Elaine from Sacramento is on the telephone with us, and perhaps, Elaine, you've got a question or a comment that will fuel more debate here. Elaine.

CALLER: I don't understand why they have the right to take her down as head of her company, and everything, when she has not been found guilty of anything. She has to go to a trial first in the United States, you're innocent until proven guilty.

CHERNOFF: Let me answer that question, if I could. This is actually Martha Stewart's decision to step down right now as chairman and CEO of the company, not -- she's not being forced by the federal government, by the prosecutors or by the Securities and Exchange Commission to step down just yet. She did this in what she believes is the best interest of her company. And obviously she has to focus a lot of attention now on her defense, and can't really focus exclusively on running the company itself. She's got Sharon Patrick, the president, now stepping in as the CEO. The truth is Sharon Patrick has been running the day to day operations of Martha Stewart for some time anyway.

WHITFIELD: OK, and perhaps the other side of that argument is while any verdict hasn't pressured her to step down, perhaps it's the legal proceedings altogether that she feels the pressure and that's why she had to step down.

Allan, we've got a call from Edward of Myrtle Beach and he's on the telephone with us. Edward, what have you got to say? We lost him. All right, why don't we go ahead and kind of broaden out that topic then, if we can, Dennis, because...

KNEALE: Yes, I...

WHITFIELD: ... you know, the question was, you know, why would she be forced to step down, when really maybe it's the pressure that led her to step down, not necessarily any verdict, which we know haven't come.

KNEALE: Look at, you know, Martha Stewart's stock actually went up when finally the shoe dropped with the charges and all that.

Now, I think the caller that you just mentioned with, however, was kind of right in that clearly the feds want to force her out of her company, even though her company had nothing to do with the alleged crime. If they can get a conviction of her on any of these charges, and some of them that are quite trivial, they can force her to actually step aside from her company.

The question is, with Martha stepping down, is she really going to let go of control? Being a control freak is what built her empire, and it's what got Martha in trouble in this latest case.

CHERNOFF: Well, ironically, even if she does step down, even if she is banned from any position in the company, she will still control the company because she has virtually all of the voting stock of the company. So the feds can't do anything about that, she can still hold the stock.

WHITFIELD: All right, Allan and Dennis, I've got Edward back on the line with us from Myrtle Beach. Edward.

CALLER: My comment and my question is -- we've listened about Martha Stewart for over a year now, and Enron and WorldCom wasn't even in the news no more than 60 days and nothing was done to them. I'm not a great Martha Stewart fan, but I think they're really trying to crucify her.

CHERNOFF: If I could answer that, please.

WHITFIELD: Go ahead.

CHERNOFF: These are two -- actually, three -- entirely different cases. The Martha Stewart case is frankly a very simple case. This investigation easily, easily could have been finished within one month. It's very straightforward. WorldCom and even more so for Enron, these are very complicated investigations. The feds are still working through all the information, still interviewing people, much more complicated, and I think that is a huge difference in the two situations.

The reason it took so long here to get to a prosecution of Martha Stewart, an indictment of her is simply the fact they were going back and forth trying to get her to do a plea bargain. The feds were trying to squeeze her, and she simply wasn't going to bench, she didn't want to serve jail time.

WHITFIELD: We've got lots of questions and comments coming in, Allan and Dennis, not just from the telephone but through e-mail as well, and Dale in Philadelphia writes -- "I wonder if Democrat Martha Stewart is being made an example of by a Republican administration? I notice the glaring absence of any Republican Enron or WorldCom friends of and contributors to the president being indicted for far worse." Perhaps this is rather similar to Edward's phone call out of Myrtle Beach, but Dennis I'll let you tackle this, whether (UNINTELLIGIBLE).

KNEALE: I'll take that one. I don't think this is truly about partisan politics of Democrat versus Republican. I think this is about a bunch of federal prosecutors who feel like, look, when we come and ask you a question, you better not lie to us. And if you lie to us, we will string you up. This is about fighting arrogance. I think that Martha, unfortunately, managed to make some people in the government very angry. And managed to make them feel disrespected. And now they're making her pay for it.

CHERNOFF: That's exactly right. There's no question about it. In fact, this all started with a congressional investigation. The House Energy and Commerce Committee was investigating the entire ImClone situation. And then they looked into Martha's stock sale, and her attorney sent a letter to the committee saying, hey, you know, she had this prearranged agreement, there's no reason that she has to show up and sit down and do an interview with you folks, just drop it. They were trying to get these folks to drop their investigation. And that really angered the committee, and they passed it along to the Justice Department. WHITFIELD: All right, Allan and Dennis, hold tight for a minute, we want to resume this conversation and perhaps find out or try to explore how this could have been expedited, even though a year has passed now, we have got more e-mails and telephone conversations coming in in a moment.

(COMMERCIAL BREAK)

WHITFIELD: Welcome back to "Dollar Signs." We're talking about Martha Stewart and the mess that she's in, and continuing our conversation now, Allan Chernoff, CNN's financial correspondent, as well as the managing editor of "Forbes" magazine, Dennis Kneale.

And now joining us for the first time in this conversation from Chicago, Illinois, criminal defense attorney Steven Molo. All right, gentlemen, let's pick up where we left off and let's bring in yet one more e-mail that we've got from Brandon who asks -- "I just wanted to say, she should be in jail or be on her way to jail shortly. She may be a celebrity, but that does not put her above the law. I thought this was America." So, Mr. Molo, let me bring you in on this one, Steven, how do you see this?

STEVEN MOLO, CRIMINAL DEFENSE ATTORNEY: Well, this is certainly a sentiment that a lot of people have. The flipside of that coin is a lot of people believe she would not be charged but for her celebrity status. The point has been made throughout the news media, and I think one of your e-mailers earlier made the point that there are lots of other things that the government has its hands on right now -- Enron, WorldCom -- and lots of other big investigations -- Adelphia, Health South -- there are many, and there is a significant sentiment that why go after Martha Stewart for something like this? And the answer is because government views deterrence as a legitimate factor in deciding whether to prosecute someone.

And they believe that by prosecuting somebody of this profile, of this stature, that it will deter others from committing this crime in the future.

WHITFIELD: So Steven, you do see it as an issue of celebrity and not just accountability, then? Celebrity first.

MOLO: Well, I mean, accountability -- there's no question that the nature of these charges, obstruction of justice charges, indicate that the government is angry. They're not happy with the fact that they believe that they've been lied to and misled during the course of an investigation. Had they not had those charges, what is there? I mean, there's no insider trading charge, there's no criminal insider trading charge here. And it's highly unusual to see an obstruction charge like this out there without an underlying substantive charge made as well.

WHITFIELD: Let me just ask everybody's final thoughts now, and Allan, let me begin with you, because you had alluded to this could have been a case resolved within a month; instead it's been at least a year and it's still not over yet. What went wrong? CHERNOFF: Well, it certainly could drag on for a very long time, there's no doubt about that. But you know, these things take time, the negotiations back and forth, the investigations. Let's just end with the point that the government does take this issue of obstruction of justice very seriously. Not very long ago, a couple of months ago, they also indicted Frank Quattrone, a leading investment banker who had worked for CS First Boston, and that was the primary issue, again, in that case. So it's not only Martha Stewart who is being indicted for this issue of trying to block investigations.

WHITFIELD: All right. Dennis?

KNEALE: You know, there's a story about the sheriff who would arrest hippies, and the hippies would say, what are you arresting me for? And he'd say, because you're resisting arrest. And if we're not careful, we're going to get to a point where you go investigate a big crime, the person fibs, and then you throw them in jail for the fib when they really never committed the crime, and that's the Martha case.

WHITFIELD: All right, Steven, how do you sum this up, the lessons learned?

MOLO: We're going to see a very interesting year ahead of us with this case, because her lawyers have basically drawn a line in the sand and she's drawn a line in the sand and said, I'm going to fight this, I'm going to go to trial, I'm not afraid. She's a great communicator. We're going to see a lot of her communication over the next several months as the case gets ready for trial, closer to trial and her lawyers are very capable people and they're going to throw up a great defense. I think this is going to be one great fight.

Well, stay with CNN this evening, all the latest news and more coming up. Next hour, "PEOPLE IN THE NEWS" profiles the embattled guru of gracious living, Martha Stewart, the subject of the past 30 minutes for us, and the legendary symbol of grotesque living, Ozzy Osbourne. At least some think it's grotesque. And at 6:00 Eastern time, we'll update today's stories including the outcome of the Belmont Stakes on "CNN LIVE SATURDAY." And at 7:00 Eastern, "CAPITAL GANG" takes up the Middle East summit, tax credits and Hillary's tell- all book, expected out on Monday. All of that right here on CNN.

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